El Molla: Egypt's giant Zohr gas field aims to start output in 2017

Egypt aims to start natural gas production from its massive offshore Zohr field in 2017, a year ahead of schedule, oil minister Tarek El Molla said.

The Zohr gas field, discovered by Italy’s Eni, is the biggest in the Mediterranean, and with an estimated 30 trillion cubic feet of gas it is expected to plug Egypt’s acute energy shortages and save it billions of dollars in precious hard currency that would otherwise be spent on imports.

“We’re looking to expedite the agreement with the partner and speed up production. Hopefully we will begin production from the discovery in 2017,” El Molla said in an interview at the Reuters Middle East Investment Summit.

Eni has said it expects to invest between $6 billion and $10 billion to develop the Zohr field. Previously, officials had said production was expected to start in 2018.

Once an energy exporter, Egypt has turned into a net importer because of declining oil and gas production and increasing consumption. It is trying to speed up production at recent discoveries to fill its energy gap as soon as possible.

In October British oil major BP said it would begin gas production at its north Alexandria concession in early 2017 rather than mid-2017. That should add up to 1.2 billion cubic feet of gas per day by late 2019.

In July the oil ministry raised the price paid for gas from Eni to a maximum $5.88 for every million British thermal units and a minimum of $4, based on amounts produced, from $2.65. It then cut a similar deal with British Gas.

Ismail’s success in reinvigorating the sector, which is vital for economic growth at a time when energy shortages have crippled industrial production, helped propel him to the post of prime minister in September.

The total value of Egypt’s natural gas projects, excluding Zohr, is now $13.8 billion, and El Molla said the Zohr discovery had made additional investment much more likely.

“The Zohr discovery whet the appetite of other foreign companies working in Egypt to speed up seismic discovery operations and exploratory wells.”

Current projects underway will add 2.4 billion cubic feet to the country’s daily gas production by 2019, said El Molla. Current production is roughly 4.5 billion cubic feet.

On the back of this, the stock of foreign oil and gas investment in Egypt is expected to increase to $8.5 billion during the current fiscal year ending next June, from $7.5 billion last year, said El Molla.

LNG BOOM

Egypt’s drive to expedite foreign investment in gas production comes just as the country has become a top growth market for imported liquefied natural gas (LNG).

Egypt entered the LNG market with a burst of imports this year after leasing a floating storage and regasification unit (FSRU) from Norway’s Höegh LNG for five years in April. FSRUs allow Egypt to import LNG and convert it to natural gas to feed into its power grid.

A second FSRU, provided by Norwegian group BW Gas , arrived in September and is expected to begin operating this week, while a third FSRU is likely to come by the end of 2016 or the first quarter of 2017, said El Molla.

Egypt expects to stop importing LNG by 2020 as projects such as the Zohr and BP fields come online.

In the meantime, the government last Wednesday approved the creation of a gas regulatory agency that will permit private companies to import and sell their own gas. Several private sector companies have applied to import, said El Molla.